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Alborosie
4 years ago
5

(Calculating the cash conversion cycle) Network Solutions just introduced a new, fully automated manufacturing plant that produc

es 2,000 wireless routers per day with materials costs of $50 per router and no other costs. The average number of days a router is held in inventory before being sold is 45 days. In addition, the company generally pays its suppliers in 30 days, while collecting from its customers after 25 days.
a. What is the cash conversion cycle?

b. What would happen to the cash conversion cycle if the company could stretch its payments to suppliers from 30 days to 50 days?

c. How much would working capital financing be reduced if the company stretched its payments to suppliers from 30 days to 50 days?
Business
1 answer:
forsale [732]4 years ago
3 0

Answer and Explanation:

The computation is shown below:

a. As we know that

Cash conversion cycle is

= Days inventory outstanding + days sale outstanding - days payable outstanding

= 45 days + 25 days - 30 days

= 40 days

b. Now if the payment of supplier changed from 30 days to 50 days which is

Cash conversion cycle is

= Days inventory outstanding + days sale outstanding - days payable outstanding

= 45 days + 25 days - 50 days

= 20 days

c. Now the reduction in working capital is

= Difference in days × production × material cost per order

= 20 days × 2,000 × $50

= $2,000,000

We simply applied the above formulas

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2 years ago
g George's gross pay for the week is $800. George's deduction for federal income tax is based on a rate of 15%. He has a weekly
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The amount of George's net pay is $568.8  per week.

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Because George's yearly pay is under the limit for OASDI, he don't bear the income tax either.

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Personal deduction             15%     $120.0

Medical insurance deduction       $50.0

FICA Social Security          6.20%      $49.6

FICA Medicare                    1.45%        $11.6

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3 years ago
At the beginning of the year, Bennett Supply has inventory of $3,500. During the year, the company purchases an additional $12,0
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Answer:

Cost of goods sold is $ 11,500

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cost of goods sold:

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